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Bills Introduced To Alter Liquor Control Structure

BERLIN — With the introduction of a pair of bills in the House and Senate this week, the abolition of the county’s beleaguered Liquor Control Board (LCB) now appears to be on the fast track.

Delegates Mike McDermott and Norm Conway this week introduced House Bill 1237, which calls for the abolition of the LCB and the creation of a similarly operated Worcester County Department of Liquor Control, essentially turning over the distribution of liquor to the county. Senator Jim Mathias introduced his own version in that chamber, and while the two bills had some minor semantic differences, the House Bill is being reconciled with the Senate Bill in the interest of consistency.

McDermott said this week the proposed legislation was borne out of a desire of the County Commissioners to take over the purchase and distribution of liquor after several improprieties were uncovered last year. The bills also appear, on the surface, to appease the hundreds of liquor licensees in the county, who wanted an almost immediate transition to a free market system.

“Unfortunately, circumstances often dictate the need for a measure of change,” he said. “In this case, these latest problems highlight ongoing issues with how the LCB was functionally operated. The commissioners are determined to see a change and the public confidence needs to be restored.”

Throughout the summer, the LCB came under increased scrutiny, including an extensive audit by the state Comptroller’s Office, into alleged trade violations. When those allegations were confirmed at the completion of the state audit last fall, the LCB all but admitted the violations and agreed to pay a $16,000 fine to avoid further proceedings.

In addition, the LCB’s revenue contribution to the county dropped from around $411,000 in 2009 to just about $112,000 last year. As recently as two or three years ago, the LCB’s annual contribution to the county and its towns approached $1 million.

The bills, as written, retain the current formula for the distribution of revenue derived from the sale of liquor to the county at large and its municipalities. According to McDermott, assuming the county can turn around the significant drop in revenue it received from the LCB last year, the amount of money distributed to the towns could improve under the new county leadership.

“The distribution of revenue remains intact,” he said. “If the county is successful, if it can operate efficiently, it might be able to improve the share to the municipalities.”

In a nutshell, the bills, if passed, would turn the distribution of liquor to the hundreds of licensees in Worcester over to the county, which would operate the department in much the same way LCB currently does. Ostensibly, the county would utilize the same physical elements of the LCB, the warehouses, distribution centers and retail stores, many of which are already owned or leased by the county. According to McDermott, the LCB leadership is already working with the county on the possible transfer of the assets.

“The LCB has reached out to the county and they’re already having discussions about a smooth transition,” he said. “The county will assume all responsibility for the LCB operation including their assets and liabilities … One of the main things I heard from them was concern about the employees. That was also a major concern of the commissioners, and frankly a major concern of the delegation, but this bill provides for that.”

The new county department would also take over the LCB’s retail operations in Worcester. The County Commissioners would appoint a director to run the department.

The creation of the new county department could create a bridge of sorts to a free market for liquor distribution down the road. The bills include a sunset provision that would allow the licensees to begin purchasing liquor directly from private wholesalers beginning in 2016.

According to the language in the bills, after May 1, 2016, the licensees will have the option of sticking with the county department, or dealing directly with private sector licensed wholesaler, or a combination of both. The bills, as written in the House, includes an opt-out fee for the licensees would be applied. However, legislators and licensees contend there will be no fee included once the bills are reconciled.

“It includes a move toward a free market system by 2016, which is what everybody wanted out of this,” Mathias said. “The licensees will be able to purchase from wholesalers in five years without an additional fee. They can continue to purchase from the county, or they can deal directly with the wholesalers, or both. They wanted a free market system and this will lead to that five years down the road.”

After years of mistrust between the LCB and the liquor license holders in Worcester, culminating with the proven accusations of unfair trade practices and other improprieties last summer, the bills, if passed, would allow the licensees to deal directly with the county operation, under the direction of the commissioners, according to Mathias. Just as importantly, the measure could restore the public’s trust in the sale and distribution of liquor in Worcester.

“First of all, the public will get full accountability and full transparency,” he said. “They will be able to come before their elected officials when they want something explained or they need some answers.”

The intent of the legislation is to turn over the purchase and distribution of liquor in Worcester to the county, but it remains to be seen what the landscape will look like five years down the road. McDermott said the county-owned wholesale operation might go away in the future when the licensees have the option of dealing directly with private sector wholesalers.

On the other hand, if the county can continue to provide the level of service and an attractive discount plan, some licensees might decide to continue to deal directly with the county department. McDermott said he believes the commissioners do not have the intent or desire to be in the wholesale liquor distribution business in the long term although they would likely retain the retail operations.

“They’ve indicated they don’t want to be in the liquor business, particularly on the wholesale side,” he said. “They know they’re headed that way. If they are successful and competitive, they might change their minds.”

If the bills are passed into law, the new system would take effect on July 1, right in the middle of a hectic summer season. However, McDermott said the county and the current LCB leadership would be prepared for that eventuality.

“The LCB has to prepare for the summer and do what they normally would do,” he said. “Meanwhile, the county has to be preparing for a smooth transition. The timing isn’t great, but that’s how the bill is written.”

Mathias said the bills appear to appease all of the stakeholders in the process, including the county and its municipalities, the licensees and the public, while retaining most of the current LCB employees. While it may not be perfect, the legislation as written appears to accommodate all of the interested parties, and the trick now is getting it passed into law. Because the bills are specific to Worcester County, they should be considered local courtesy bills.

“Everybody appears to be satisfied as we move forward,” he said. “Now, it’s up to me on my end to get the bill passed. It’s a work in progress, but I feel confident about it.”

By and large, the Worcester County Licensed Beverage Association (WCLBA), and by extension, the Worcester Free Market Alliance, appear to be pleased with the legislation, although viewing the 2016 sunset provision for dealing directly with wholesalers with caution.

“We’re happy to see there is a sunset provision for a free market in five years,” said WCLBA President Doug Buxbaum. “We just have to hold our elected officials to their word and actually see the sun set in 2016.”